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Securities and Exchange Board of India (Sebi) chairman U K Sinha said on Wednesday said the credibility of the investment banking community had taken a hit as retail investors were now wary of investing in public offers. The regulator lashed out at the investment banking fraternity for not acting in the interests of retail investors, pointing out that the bulk of the public offers are currently trading below the issue price.

The retail investor is thoroughly confused about what to expect from the primary market. This is a question of credibility for all of us and we have to take serious steps to restore that, Sinha observed. The Sebi chief asserted that some introspection was required. If we fail then despite all our efforts we will not be able to draw retail investors or even domestic institutional investors, he said, speaking at a seminar organised by the Association of Investment Bankers of India.

Sinha said that bankers cannot always attribute the post-listing performance to the broader market fall. We can argue that we are not responsible for the post-issue price or for the general economy. But the data is being adjusted for the decline in the market so obviously, some amount of introspection is required, he said.

When we started asking questions on matters like due diligence and insisted that the complete track record of the banker needs to be maintained for inspection by Sebi officials, there was huge resistance and people thought that we were trying to be too intrusive, the Sebi chief said.

A Sebi analysis shows that of 117 issuances between 2008-09 and 2011-12, 72 were trading not just below the issue price but also underperforming the benchmarks. In other words, two-thirds of issuances had underperformed the indices. Comparing the investment banking business with matchmaking, Sinha said it seemed bankers highlighted only the good qualities of a company while choosing to ignore the risk factors.

Interestingly, Sebi has taken a stern stance against investment bankers tightening regulations related to the due diligence of an company going in for an initial public offering (IPO). Sebi has made it mandatory for bankers to disclose their track record in the draft document of IPOs. What does the Indian matchmaker do He goes out and tries to sell all the good qualities of the bridegroom. Are we doing the same with companies that are not ready (for an IPO) he asked.